SWISS RE PRESENTS AN ANALYSIS OF NEW GLOBAL RISKS THAT COULD AFFECT COUNTRIES AND SOCIETY
New risks are emerging as the global community faces well-known challenges such as the pandemic, war in Ukraine, economic instability and declining trust in established social institutions, according to the Swiss Re SONAR report on the 10th company anniversary.
“We live in a world where billionaires can take day trips to the stratosphere, crypto-assets defy established financial norms, and climate change is altering the very nature of our physical environment,” said a statement posted on the site of the international reinsurer.
A global pandemic, geopolitical strife, rising inflation and an ongoing climate crisis are just a few of the many risks SONAR has explored over the past decade that have ultimately materialized, according to Patrick Raaflaub, director of the Swiss Re Risk Group. However, the study of new risks is not forward-looking. It’s about raising awareness of the risks that can affect society, and of the appropriate preparation, the report says.
At the same time, it is noted that crypto assets and quantum computing are creating new risks in the global financial system.
In today’s technology-heavy financial system, cryptocurrencies such as bitcoin and ether have emerged as potential competitors to traditional currencies. Along with these new forms of currency, other crypto assets have emerged. Tokens, for example, allow people to buy digital images of real estate assets, such as artwork or real estate. They can be sold and give their owner access to assets, products or services. Changes in ownership, taxation, regulatory issues and other risks associated with new asset classes pose new questions for insurers. For example, are certain crypto assets subject to existing ownership or cybersecurity policies?
The security of the new digital financial economy also faces new risks. In particular, thanks to quantum computing, a new generation of computers is poised to perform tasks inaccessible to modern machines. These ultra-intelligent technologies offer significant advantages: sophisticated weather modeling, advanced medical research and financial analysis. As they mature, they can also become a threat to existing computer security protocols, potentially breaking standard encryption keys used in online communications and data transmission, the report notes.
In addition, a new generation of emerging risks is linked to climate change, the company points out.
“Swiss Re identified the threat of climate change as early as 1979. More than 40 years later, the effects of climate risks are felt very strongly in our daily lives. Beyond what we already see, climate change is creating a new generation of emerging risks,” the paper points out.
This year’s SONAR report explores how melting permafrost that covers a quarter of the northern hemisphere could not only damage infrastructure and accelerate climate change, but also release disease-causing pathogens that have been frozen for decades.
Moreover, agriculture is particularly sensitive to climate change and struggles to reduce its contribution to global warming. Emissions from global food production account for about 31% of total anthropogenic carbon emissions. The challenge for agriculture is to increase productivity and feed more people while reducing emissions. Insurers can play a vital role in the faster adoption and scale-up of sustainable agricultural practices by providing tailored risk coverage solutions and promoting climate-smart and regenerative agriculture, says Swiss Re.
“There was a time when today’s big issues such as climate change, the pandemic, geopolitical conflicts and inflation were new risks in their own right. SONAR’s 10th anniversary edition is a poignant reminder of the long-term potential of emerging risks and how the insurance industry is helping to build societal resilience,” the report says.
The Swiss Re Group is one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer.